26 Dec
2018

The intersection between trademarks and labelling laws: as illustrated by the Canadian food and cannabis industries

Bereskin & Parr LLP - Canada

There are many Canadian trademark laws, regulations and statutes regarding selection, labelling and advertising in the food and recreational cannabis industries. All of these will have an impact on long-term branding rights and enforcement on food and cannabis products.

The selection and lawful use of trademarks is affected by not just trademark laws, but many other statutes. The Trademarks Act contains specific prohibitions on the use and registration of marks that offend the rights of public authorities and government agencies, as well as registration of marks that are names, clearly descriptive, generic and confusing with prior used and registered marks. However, using examples in the food and nascent recreational cannabis industries, it is important to consider the many other Canadian laws and regulations that affect the selection of trademarks and long-term branding and enforcement.

Trademarks for food

Section 5(1) of the Food and Drugs Act prohibits the labelling, among other things, of any food in a manner that is false, misleading or deceptive, or that is likely to create an erroneous impression regarding its character, value, quantity, composition, merit or safety. Section 5(2) states that any food that is not labelled in accordance with, or contrary to, the Food and Drug Regulations is deemed to be contrary to Section 5(1).

The Canadian Food Inspection Agency (CFIA) – the federal regulatory agency responsible for enforcing the Food and Drugs Act and the Food and Drug Regulations, among other things – has published an industry labelling tool designed to help food manufacturers ensure that their labels are compliant. The tool has specific guidelines on the use of many words commonly included in food and beverage trademarks.

Trademarks for food commonly make express or implied representations about the food’s composition, origin or production methods. A search of the Trademarks Register reveals many marks containing words such as ‘pure’, ‘organic’, ‘harvest’, ‘artisanal’ and ‘craft’, all of which may be problematic depending on the specific goods.

The CFIA has always taken the position that trademarks are not exempt from its guidelines and the general prohibition that labels must not mislead. To illustrate this, the CFIA issued a decision that, under the guidelines at the time, a trademark containing the word ‘natural’ could not be used in association with breads that come from a premix containing dextrose, lecithin, ascorbic acid and enzymes. The CFIA concluded that since the word ‘natural’, even in a trademark, was considered to be a ‘natural’ claim, a trademark for bread containing additives or preservatives would not meet its guidelines.

The Food and Drug Regulations also set out an exhaustive list of permissible food nutrient content claims. A nutrient content claim is a claim about the presence or absence of a nutrient such as energy, fat, sugar and protein in a food. If a desired claim is not listed in the Food and Drug Regulations, it cannot be made. Claims such as “low carb”, “reduced carbohydrates” and “source of carbohydrates” are not included in the list of permitted claims. When amendments to the regulations regarding nutrient content claims came into force, it left many applicants for trademarks that made express or implied carbohydrate claims with no ability to lawfully use them on food, resulting in the abandonment of dozens of trademark applications.

Trademarks for cannabis

The legalisation of recreational cannabis in Canada on 17 October 2018 provides a further illustration of the intersection between trademarks and labelling laws. The Cannabis Act and Regulations set out very specific rules about the packaging and labelling of “cannabis products” and “cannabis accessories”, both of which are defined terms. (This article does not address the rules regarding cannabis for medical access.)

To begin to understand this intersection, it is important to understand the purpose of the Cannabis Act, which is to uphold public safety and protect young persons, generally defined as anyone under the age of 18. This means, in part, that there can be no inducements to use cannabis products. To further the purpose, Sections 26 and 27 of the Cannabis Act broadly prohibit labels and, by inference, branding that:

  • appeals, on a reasonable basis, to young persons;
  • sets out a testimonial or endorsement, however displayed or communicated;
  • depicts a person, character or animal, whether real or fictional;
  • evokes a positive or negative emotion about a way of life; or
  • contains any information that is false, misleading or deceptive or that creates an erroneous impression about the performance or safety of the product.

Some of these prohibitions seem clear, such as that relating to the display of characters or animals. Canada will not harken back to the early days of tobacco with JOE THE CAMEL or similar. But others are more subjective, leading to potential uncertainty. Does a licence from Willie Nelson to use a song title as a brand name of a cannabis product constitute an implied endorsement, even if it does not specifically depict or name Willie Nelson? What “on a reasonable basis” is appealing to a young person? What evokes a positive or negative image about a way of life? To date, Health Canada – responsible for enforcing the Cannabis Act – has not offered any labelling guidelines beyond the publication of two compliant sample labels showing where and how the two permissible brand names or elements may appear, and has not given any examples of what brands would be acceptable.

The regulations set out requirements for labels for cannabis products, including the brand name, with limitations on its presentation, such as type size (eg, smaller than or equal to a mandatory health warning message) and colour (eg, not a colour that has the lustre of metal or metallic properties, or that is fluorescent), and providing that brand names can be displayed only once on the principal display panel.

In addition to the brand name, only one other brand element is permitted on the principal display panel. ‘Brand elements’ are broadly defined to include: “a brand name, trademark, tradename, distinguishing guise, logo, graphic arrangement, design or slogan that is as associated with or evokes cannabis, a cannabis accessory, a service related to cannabis or any brand thereof”. The second brand element can be displayed only once on the principal display panel, and again has restrictions similar to the brand name regarding size (relative to other mandatory information), colour and lustre.

Other restrictions will affect trademarks with design features. If a cannabis product contains tetrahydrocannabinol in a concentration greater than 10 micrograms per gram, the standardised cannabis symbol (right) must appear on the label. The size, placement, orientation and colouring are all prescribed by the regulations. The regulations also prohibit a representation, such as an illustration, sign, mark, symbol or design, that “so closely resembles the standardized cannabis symbol that it is likely to be mistaken for that symbol” and is “likely to cause confusion” with the standardised symbol. The breadth of the prohibition potentially means that trademarks containing any representation of a cannabis leaf could be offside.

In addition to labelling, the Cannabis Act contains prohibitions on consumer promotions of cannabis products, cannabis accessories and related services that mirror the labelling prohibitions; namely, that are appealing to young persons, contain a testimonial or endorsement, depict a person, character or animal, or evoke a positive or negative emotion about a way of life.

‘Promotions’ are very broadly defined as “to make, for the purpose of selling the thing or service, a representation — other than a representation on a package or label — about the thing or service by any means, whether directly or indirectly, that is likely to influence and shape attitudes, beliefs and behaviours about the thing or service”. While the distribution of educational materials about cannabis might be excluded, if found to “influence” behaviour, then the prohibitions will apply. These prohibitions (Sections 16(c) and (d) of the act) do not apply to promotions by licensed cannabis producers, sellers or distributors directed to other licensees, nor the consumer, either directly or indirectly. This means that marks that are prohibited for use on labels may be used in promotions between licensed entities.

Filing for cannabis marks

Since there are many benefits of trademark registration, cannabis brand owners may still want to protect brands that they reasonably intend to use, either on cannabis or on other promotional or related products, even if the brands, or their display, might not clearly comply with cannabis branding laws. One significant legislative change leans in favour of filing. Amendments to the Trademarks Act, passed but delayed for years, will finally come into force on 17 June 2019. One of the most significant changes is that use as a registration requirement will be eliminated in Canada. Under the existing regime, marks can be registered only after in use, with no special dispensation for marks that cannot be used because of legislative or regulatory restrictions. Eliminating this use requirement will make it possible for applicants to register a mark if they intend to use it (leaving, for now, how to establish intent if challenged).

Another point in favour of filing is that whether a mark may be legally used, for example, because it offends the Cannabis Act, is not an issue that will be raised in examination before the Trademarks Office. This means that any legislative restriction on the ability to use a mark will not prevent an applicant from obtaining a registration. Cannabis trademarks must still meet ordinary registrability rules (eg, they may not be clearly descriptive, generic or confusing with other filed or registered marks), but unless challenged by opposition, a cannabis mark that might offend the Cannabis Act will not be rejected during examination.

That is not to say that filing is risk free or that a registration is a certainty. Notably, applications have in the past been successfully opposed on the basis that the applicant’s use was contrary to federal laws, and thus the applicant could not be satisfied that it was entitled to use the trademark in Canada. It is too early to tell whether cannabis applications could be refused on the basis that they either are of a type not permitted or are not allowed to be displayed on goods due to Cannabis Act or Regulation restrictions.

Despite registrability concerns, filing for both a broad range of cannabis marks and a variety of goods and services might be prudent since regulations may change over time. In the context of food, consumers demand more and different information on labels, and thus while qualitative “carb” claims are currently not permitted, they may be in the future. With respect to cannabis, while the government might justify a restrictive approach at launch, over time, such restrictions might be relaxed, especially since many seem to be at odds with requirements in other jurisdictions where cannabis sales have been legalised.

Cannabis registrations

Cannabis registrations seem to be excluded from summary non-use cancellation proceedings that apply to all other registrations. Specifically, after a registration’s third anniversary, it normally becomes vulnerable to a non-use challenge that may result in cancellation if the registered mark has not been used in Canada in the three years before commencement of the proceeding. However, Section 136(2) of the Cannabis Act has a saving provision, which states that the absence of use of a trademark as a result of compliance with the Cannabis Act constitutes special circumstances that excuse non-use for the purposes of the Trademarks Act.

This creates a unique class of registrations – registrations that a cannabis company might claim that it cannot use because use is contrary to the Cannabis Act, but cannot be cancelled due to the saving provisions in the Cannabis Act. Additional proposed amendments to the Trademarks Act in Bill C-86, introduced in October 2018, appear to limit the ability to enforce registrations in the first three years following registration unless there is use of the mark in Canada “or special circumstances to excuse non-use”. Logically, it would seem that compliance with the Cannabis Act amounts to special circumstances for the purposes of enforcement, but Bill C-86 and the Cannabis Act are not so expressly worded. Other legal remedies, such as passing off, depend on use, and there are no saving provisions for that tort.

Given that the Cannabis Act was only recently passed, there are still many questions for which there are no readily apparent answers. However, all brand owners involved in producing, selling or distributing will need to keep these restrictions in mind as they roll out their businesses and make brand choices in this new and exciting market.

Jennifer McKenzie

Partner

[email protected]

Jennifer McKenzie is the leader of the regulatory, advertising and marketing practice group and the co-leader of the cannabis practice group. Ms McKenzie’s practice is diverse – she reviews advertising and claim substantiation for clients in a wide range of industry sectors, advises on consumer protection legislation, including privacy laws, and practises trademark prosecution and enforcement.

Cynthia Rowden

Counsel

[email protected]

Cynthia Rowden specialises in all areas of trademark and copyright law – including trademark opposition and cancellation proceedings – and licensing and related transaction advice. She also manages the international trademark portfolios of large Canadian companies and the Canadian portfolios of some of the biggest trademark owners in the world. In addition to being a frequent writer and speaker on trademark law, Ms Rowden is active with organisations monitoring and commenting on changes to Canada’s trademark laws.